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Starbucks takes on India

Indian heads will bob on overdrive as everyone gets hopped up on Starbucks caffeine. R. K. Krishnakumar vice chairman of Tata Global Beverages (left) and John Culver president of Starbucks China and Asia Pacific.

Starbucks is due to open its first store in India through a 50-50 joint venture with Tata Global Beverages. The first branches will open in Mumbai and New Delhi in September and about 50 stores will follow within the first 12 months.

John Culver, Starbucks president for China and Asia Pacific, said there could be as many as 3,000 Starbucks stores in the world's fastest-growing economy after China. China currently has about 500.

Starbucks declined to comment on the pricing at its future Indian stores. The price of a cup of coffee ranges widely in India, where consumers can spend Rs 53 rupees on a cappuccino at a local chain or Rs 400 on a frappé at The Coffee Bean & Tea Leaf, an international chain that already has a presence in India.

Strict limits on foreign ownership in India in the past have kept many international brands from setting up shop, including Ikea and Walmart. The latter met with stringent conditions on a recent deal while the Walmart negotiations have been put off altogether.

Starbucks however has had a less difficult time as a single brand retailer. They will retain 100 percent ownership of their outlets with the requirement that a part of their products are from Indian producers.

Masala chai still wins in India.Much of the coffee served in Indian Starbucks will be locally sourced through partner Tata Global Beverages, India's biggest coffee producer. Half of the coffee produced in India comes from Karnataka, where beans yield a sweet, low acidity brew.

Although better known as a nation of tea-drinkers, Indians in the coffee-producing region of Karnataka have long loved coffee. A mild, milky coffee concoction is traditionally consumed there.

However, most of the beans from India are destined for export rather than for deepening domestic coffee culture.

In recent years, it became cool to drink coffee due to the influence of Western culture and fashionable international brands, such as Starbucks.

And coffee houses have become an alternative sanctuary and social hangout for India's youth in a culture that generally shuns bar-going, particularly for young women.

About 1,000 coffee shops have opened in the last five years to cater to a market that is growing by 25 percent each year, according Technopak.

Café Coffee Day, currently India's largest coffee chain, first opened in the mid-1990s and was seen by patrons as more of an Internet café. Stores had to offer free coffees on top of paid-for Internet time to introduce people to the modern variations of the drink.

While Café Coffee Day has managed to take firm root in India, with more than 1,200 outlets, its patrons still prefer to order milkshakes and teas to coffee.

Starbucks may well face a similar localization issue with their products.

After traveling around the world on a fistful of dollars, Zoe returns to Hong Kong, where she grew up, to discover and write about all the inspiring stuff that happens here on a daily basis.